The Tricky Enterprise Applications Needs of Plastics Producers

Another market where the vast majority of general-purpose enterprise resource planning (ERP) and supply chain management (SCM) products demonstrate a number of "fatal flaws" would be plastic producers, as one of several mill industries. Fatal flaws are those "must have" capabilities, whose omission impede the user enterprise's operation—even to the extent of complete failure, let alone helping increase competitiveness. For more information, see Find The Software's Fatal Flaws To Avoid Failure).

Part One of the series The Tricky Enterprise Applications Needs of Plastics Producers.

While the "future is plastics" line from the classic movie The Graduate might be somewhat disputed today by representatives from the semiconductors, composite materials, or nanotechnology sectors, the future of the plastics sector is certainly not to be sneezed at. In fact, according to the Society of the Plastics Industry (SPI), US shipments of plastics (those directly generated by producers of plastics raw materials, product manufacturers, machinery companies, mold makers, wholesale distributors, and plastic processors) totaled $310 billion (USD) in 2002, whereas another $83 billion (USD) was generated by upstream supplying industries, bringing the total annual shipments from plastics activity to nearly $400 billion (USD). Overall, the US plastics industry employed approximately 1.4 million workers nationwide in 2002. Another 772,000 persons were reportedly employed by the upstream industries that supplied the plastics industry, which brought the employment impact to 2.2 million—about 2 percent of the US workforce.

Plastics products in 2002 ranked fourth among the top manufacturing industry groups in shipments—behind only motor vehicles, petroleum refining, and electronic components and accessories. Comparative growth rates suggest that productivity in plastics manufacturing grew about 1.2 percent per year from 1980 to 2002, which was almost equal to the productivity growth rate achieved by manufacturing as a whole. With this notable contribution of the plastics industry to the economy of the US (and the world, as one would expect even more bullish figures in China and other emerging and blossoming markets), relatively few major enterprise applications vendors have chosen to target this industry with industry-specific systems, capabilities or modules. Specifically, rather than focusing on the special requirements of the industry, the vast majority of ERP or SCM vendors have chosen to develop software solutions that mostly address those needs that plastics manufacturers and distributors have in common with other discrete manufacturers and distributors. While it's a logical step, and justifiable from the perspective of vendors that target a panoply of industries (and which thus want to "kill several birds with one stone"), this usually comes at the expense of customers having to fit a square peg into a round hole.

Plastics Producers Are Manufacturers Too

To be fair, at first glance the needs of manufacturers and distributors in the plastics industry are indeed similar to those of other discrete manufacturers and distributors. Indeed, like many other manufacturers, plastics suppliers have to speed up order fulfillment, enhance inventory visibility, promote channel relationships, maintain operational flexibility, maximize profitability, and so on. Additionally, these enterprises need the ability to leverage contemporary business-to-business (B2B) electronic commerce. And similar to all businesses (including non-manufacturing businesses), plastics suppliers require a solid financial management system that provides insightful financial and cost accounting functionality with drill-down capabilities. Furthermore, like many other manufacturing and distribution businesses, plastics suppliers need complete inventory visibility to meet fulfillment commitments and enhance customer satisfaction.

With visibility of inventory in single and multiple locations, the planners should be able to reschedule in the event of problems, whereas sales people should be able to determine product availability, so that delivery expectations can be met. Such manufacturers also have to move product along the supply chain and into the hands of the customer, and to that end they need insight into alternatives to select those which are the most expedient. They must engage in proactive channel analysis, including sales analysis for marketing planning; demand analysis for replenishment planning; and cost and revenue analysis for profitability and decision purposes on contracts, quotes, and channel product mix. Indeed, plastics suppliers need the ability to trace items back to their sources, track them from source to current location, arrange multiple drop-shipments, and identify all cost elements associated with the movement of the products. Again, these needs are similar to those of other discrete manufacturers and their distributors.

All aspects of business relationship (trading partners) management, including customer relationship management (CRM), partner relationship management (PRM), and supplier relationship management (SRM) are as important to plastics suppliers as they are to enterprises in other industries. Contract management, demand replenishing, cross-reference labeling, and returned merchandise authorization (RMA) are all vital considerations for plastics as they are for other suppliers. Similarly, plastics suppliers require software systems that provide resources for multi-site operations, including multi-site engineering change management (ECM), multi-warehouse and multi-bin sourcing and costing, accurate landed costs for importers, purchase order options (sales orders, including blanket orders and releases), quoting and estimating, and lot traceability. Additionally, they need the cost and time savings ability to consolidate orders on one invoice or multiple deliveries (dispatches) on one order or across multiple orders.

As briefly mentioned earlier, many plastics suppliers also want to leverage the advantages of the Internet with electronic-commerce buy- and sell-side B2B solutions. Like other manufacturers, they thus look to modern web-enabled software that allows them to provide customers and trading partners with access to information, order visibility, online self-service, and improved communications—all with the idea of value-added fulfillment. At the same time, they may want the ability to take advantage of fulfillment cost savings via trading exchanges for online request for quote (RFQ) bidding, Internet transmission of purchase orders and production schedules, and electronic procurement using supplier catalogs (see Differences in Complexity between B2C and B2B E-commerce). Principally, as with most manufacturers and distributors across the range, those involved in plastics also seek to remain competitive in a dynamic marketplace, and they thus need tools that will enable them to level the playing field in the short term, and grow and improve their competitiveness over the long term. This objective is the often touted and sometimes fulfilled promise of ERP, SCM, and other enterprise software systems.

To make the task for plastics-oriented ERP aspirants more difficult, plastics manufacturers are highly diversified, since many employ a range of discrete manufacturing processes, which must be synchronized, integrated, and controlled. In fact, some high-level distinguishing characteristics include the application of rule-based dynamic dimensional product configuration; the accommodation of engineering changes; the formulating of multilevel estimates for custom items; the management of inventory across multiple sites; and finite planning encompassing real-time control of the factory floor. Again, these are all within the realm of the majority of major ERP and SCM software systems, but this is quite deceptive—the fact remains that these system offerings do not necessarily address the needs of the plastics industry simply because these needs are similar to nearly all discrete manufacturing environments.

Yet, the Devil (Typically) Lies in the Details

Consequently, many enterprise applications vendors fail to realize that many aspects of the plastics industry do have unique needs—or they simply ignore the fact. The failure of many vendors to traditionally address these needs has forced many plastics manufacturers to build their own (albeit ageing) systems internally, buy "boutique" or point-solution-type systems that neglect other major "horizontal" areas of the business (described above), or try to adapt or retrofit ready-made off-the-shelf ERP and SCM packages. For more information, see Buy, Build, or Somewhere Between and Build versus Buy—A Long Term Decision.

For instance, DTR Plastics ERP has been developed in close partnership with about 200 plastics processors over the last twenty years—enabling Made2Manage Systems to nowadays gain a firm understanding of such business processes. Most recently, the vendor revealed the advanced planning and scheduling capabilities of its Master Scheduler application to the trade show attendees of NPE 2006, the international plastics showcase, in Chicago, Illinois (US).

Since becoming a business unit of Made2Manage Systems in August 2004, DTR Plastics Solutions has focused on implementing a number of new customer-centric business practices, including a new product management methodology that solicits customer input at every phase, from initial feature design to the final beta testing process. One of the first fruits of this increased customer focus is the launch of Master Scheduler, which is packed with customer-driven features and a number of personalization tools, and which strives to help planners and schedulers manage inventory levels, optimize their shop floors, and meet promised delivery dates. Fully integrated with DTR Plastics ERP back-office production data, the module helps users generate forward-finite, queued, and backward-finite scheduling for all their workstations and secondary operations. It also includes other features:

APICS-based terminology and methodologies (APICS is the Association for Operations Management, formerly standing for the American Production and Inventory Control Society);

a dynamic, color-coded graphical control center that breaks down relevant scheduling data, from available raw materials to work orders in progress;

forecast- and order-driven planning for both make-to-stock (MTS) and make-to-order (MTO) items;

item customization options that tailor the Master Scheduler to suit unique production environments;

a management-by-exception tool that flags only troublesome schedule items for quick identification and resolution; and

Furthermore, DTR Plastics ERP is maintained and enhanced by a plastics-specific development group and is sold only within the plastics processing industry, whereas SYSPRO and IQMS target a number of other adjacent repetitive manufacturers, like in the automotive or consumer goods sectors. DTR Plastics ERP is built only around the unique requirements of injection molders, film and bag processors, blow molders, thermo-formers, extruders, and compounders. These are companies that typically use large amounts of formulized raw material to make discrete parts or extruded products, and which must focus every day on reducing production cycle times, optimizing material reuse, minimizing waste, effectively utilizing expensive capital equipment, and responding quickly to customer opportunities. From reducing inventory costs and monitoring scrap and regrind, to shortening cycle times and tracking items in multiple units of measure (UOM), such rare ERP solutions contain the specific functionality that their hundreds of plastics customers demand. Those few plastics-specific ERP solutions often have to manage both process and discrete manufacturing operations, and are fixtures in a variety of plastics industries.

If one thinks of examples of things that are "plastics," one will find on any desktop a telephone, stapler, monitor, computer housing, and more plastic parts. These are usually made by converting raw resins to the molded form, which is then assembled into a final discrete product, or shipped as is. One will also see examples of "processed plastics," such as extruded railings, frames, cables, and so on. Clearly, these cannot be disassembled and re-used or stocked, thus placing them more in the process manufacturing category. In fact, users often might have to link a "process" or recipe-based bill of material (BOM) to a "discrete" or assembly BOM, in order to create their final part.

For example, one might make the process manufacturing (formula or recipe) portion first, store it in the warehouse, and then later build and fill a custom container to the customer specifications. In other words, formulas and BOMs, each with a different core functionality, are sometimes tied together to deliver the final end user component. For more information, see What Makes Process Process? and Process Manufacturing Software: A Primer.